News that he’s bringing Vittorio Colao back as deputy chief executive and head of Vodafone’s European operations has only further fanned the flames of speculation that Mr Sarin is about to get the chop. Producing in euros but selling in dollars at the present rate of exchange adds up to only one thing – a thumping great loss.It’s always possible that, by staying in, BAE will eventually get a better price, but it may be an awfully long wait, and in any case the stronger likelihood is that it will end up with even less PwC has been auditing the Airbus position on BAE’s behalf. As essentially a Franco-German alliance, Airbus’s approach to the battle of the skies being fought with Boeing is likely to be decided more on grounds of political expediency than commercial reality. It was only quite recently that Airbus triumphantly announced that it had overtaken Boeing in terms of production and sales, yet there are plenty of reasons for thinking this just a temporary success soon likely to be reversed. The smart money is on Airbus already being a busted flush.The superjumbo looks more like a white elephant by the day, the development costs of the A350 have doubled, the A320, which historically has been been the workhorse for Airbus, is out of date and will soon have to respond to planned upgrades to the 737 by Boeing, and, last but not least, the euro-dollar exchange rate has moved powerfully against Airbus over the past year.

Airbus remains an intensely capital-hungry business, which would require BAE as a 20 per cent stakeholder to continue funding its share of future development needs. It makes no sense to have capital tied up in a business over which BAE has no operational, management or strategic control. The point was powerfully underlined by the warning of delays to the superjumbo, which were as much a surprise to BAE as everyone else. BAE was neither responsible for the management shortcomings that created these problems nor did it have any inkling of them until it was too late.Nor do concerns over the passive use of capital stop at the £1.9bn already tied up.

Strategically, it has no value to BAE, which for better or worse has chosen its course and intends to stick to it. Should it wish to go shopping for more US defence assets, it already has quite enough unspent credit to fund whatever it fancies. In which case, wouldn’t it be better for BAE to bide its time in the hope that the valuation eventually improves?And there’s the rub. The harsh reality is that we are already at the top of the aviation cycle, making further improvement highly unlikely. In cyclical terms, it may well be all downhill from here on in.

The Rothschild valuation is plainly a disappointment, though hardly a surprise after the EADS warning of delays to the superjumbo, but it still represents a tidy £1bn profit on book value, all or some of which will be available to return to shareholders.BAE is these days a highly successful defence contractor in which the Airbus interest sticks out like a sore thumb. Not much cause for celebration there then.
What’s more, the £1.9bn BAE is poised to accept for its interest is a pale shadow of what it was originally hoping for BAE doesn’t need the money. Parts of the Airbus programme will continue here, for the time being at least, but ownership will lie wholly with the Franco-German aerospace goliath EADS, which bizarrely has itself recently become partly Russian owned. Mike Turner, the chief executive of BAE Systems, is going to get an awful lot of flak for it, but here’s why he should, and almost certainly will be accepting the Rothschild valuation and offloading his 20 per cent stake in Airbus after today’s board meeting formally to decide the matter. Expect news of the disposal to be confirmed by the end of the week and possibly as soon as today. The case against is easily enough made, if only on the sentimental grounds that it severs all ownership links between Britain and its proud history of civil aviation.